Updated May 2020
Are you struggling to get your financial life in order? Even the most dedicated budgeters can fall into bad habits and lose track of money goals from time to time. It’s never too late to set money goals and begin taking control of your finances!
The trick to success is to set realistic goals and take concrete actions. Let’s explore ways to set money goals that are actually achievable and will give you a sense of accomplishment throughout the year:
Commit to Spending Less
There are two realistic and easy ways to improve your finances quickly: spend less and earn more. Earning more will probably take you some time, but spending less is something you can do instantly to make an impact on your financial situation.
It might seem obvious that you need to spend less if you want to save more, but what does that really look like? Well, it could be as simple as switching brands to lower your grocery bill. It could mean cutting cable and signing up for Netflix for a fraction of what you were paying for cable tv. The important thing to do is look for those ways you can spend less and then commit to following through.
If you struggle with overspending and shopping too much, be sure to read this post.
Commit to spending less money and look for areas in your budget to cut back. Here are some easy ways to spend less:
- Do a spending freeze
A spending freeze is where you plan ahead and commit to doing no non-essential spending for several days or weeks. It’s a great way to keep money in the bank and reduce your consumerism at the same time.
- Try a no-spend weekend
A no-spend weekend is pretty self-explanatory. You simply avoid spending any money for one weekend. You can get creative and find fun ways to entertain your family that require no money. Check out these ideas for how to do a no-spend weekend with kids!
Work on an Emergency Fund
You should aim to have anywhere from $500 to $1,000 in your true emergency fund as a start. This is money that you can turn to when something unexpected comes up like a car repair or a modest medical bill. If you don’t have an emergency fund, start building it now. Put money into this dedicated savings account each time you get paid. Even if it’s only $25 per check, that’s still better than having nothing.
This fall, my family experienced the undeniable necessity of having an emergency fund. Literally days before the coldest weather was about to set in, our gas furnace conked out. A visit from the repairman gave us the unfortunate news that the part in need of replacing would set us back nearly $1,000, and with a nearly 20-year-old furnace, the decision to replace the entire system was a no-brainer.
Thankfully, we do have an emergency fund that we can turn to. If we didn’t, we’d probably be paying off a credit card with an ugly interest rate for the next year. *shudder* I’ve never been happier to have that emergency fund to dip into!
Once you have that $1,000 emergency fund in place, you can focus on increasing it. Ideally, you want to cover at least 3 months of living expenses. Life is unpredictable so having that security net in place can make a huge difference if you suffer a loss of income. You truly never know when you or a loved one will face a health issue, suffer an accident, or lose a job, so do your best to plan and prepare financially.
Sharpen Your Credit
How’s your credit score looking? If it’s less than stellar, set a goal to bump it up this year!
Good credit is essential to your overall financial health, especially if you’re planning on making big purchases in the future. To qualify for a mortgage, get lower rates on car loans, and even take out personal loans, you need to show lenders that you’re responsible. They’ll be checking your credit score before you can buy a home, so it’s something to keep in mind if that’s something you’re hoping to do within the next few months or years.
To improve your credit score, you should do a few things:
- Pay off your balances each month
- Lower your balances to the best of your ability
- Never miss a payment (set up auto-payments)
- Keep credit cards open even if you aren’t using them
Related: How to Build Your Credit Fast
Request a free copy of your credit report from one of the 3 major reporting agencies. Review the info and make sure everything is correct. If you find an error or spot an issue, take care of it as soon as possible.
Set Money Goals to Earn Extra Income
Saving money is awesome, but it’s only one piece of the puzzle when you’re working on improving your finances. The other key element is to earn more. If you’re already working a full-time job, you need side hustles that can help you bring in extra income.
Make a list of side hustle ideas that you think would be a good fit for you. Consider your strengths, your special talents, and what you can offer that you know will provide value to others. It could be your handyman skills, your knowledge of WordPress, your ability to write amazing blog posts, or your love of dogs. What can you do in your spare time or on weekends that can boost your income?
If you’re interested in working from home, check out these 14 extra income ideas that you can do online!
Think Long Term, but Focus on Short Term
Set money goals that are both short and long term. When you set long-term financial goals, it helps to remember that the small wins along the way are what really matters. If you only focus on hitting the long-term goals without celebrating the short-term wins, you’ll end up being consistently disappointed. Dream big, but appreciate the steps along the way that make up the journey.
Here’s an example:
Long-term Goal: Pay off $20,000 student loan debt
Short-term Goal: Pay off $5,000 towards student loan debt by April
While the long-term goal of paying off your debt in its entirety is a great goal to have, it’s also so big that it can be overwhelming and discouraging. It may seem like a mountain that you think you’ll never be able to climb.
Having that short-term goal in place gives you something to celebrate, and hitting that milestone will make paying off the remaining $15,000 seem that much easier! You’ll be ascending the mountain and motivated to keep on following the same path.
Write down your long-term money goals and then break them down into smaller, more manageable ones. You’ll have small wins to celebrate throughout the year, which will give you the extra oomph you need to power through each month.
The start of a new year is the perfect time to set money goals and put them in writing. Think about what you want to achieve this year, and then map out the steps you should take. By breaking it down into a series of goals with small steps along the way, you’ll be motivated and encouraged to achieve your financial goals this year.